Page 5 - LatAmOil Week 20 2022
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LatAmOil                                     COMMENTARY                                            LatAmOil


                         Meanwhile, Shell cast a wider net and sought to   equipment, fabrication and site preparation are
                         challenge Sempra in court.           well underway,” he stated during an earnings
                           More specifically, it filed two suits in Mexico’s   call. “The project is on time and on budget, and
                         constitutional court in 2020, seeking on the one   we continue to expect first LNG production by
                         hand to overturn CRE’s approval of the updated   the end of 2024.
                         ECA terms and conditions and on the other
                         hand to rescind the issuance of IEnova’s gas liq-  Total turnaround
                         uefaction permit.                    Assuming that the company meets this deadline,
                                                              it will be in the impressive position of having
                         Legal defeats                        converted ECA from a gas import facility into
                         These efforts have not been successful. Mexico’s   a gas export facility within the space of 15 years.
                         constitutional court denied its request to stay   ECA was initially built for the purpose of
                         approval of the update to the terms and con-  establishing a new means of delivering gas to
                         ditions in October 2020 and then upheld that   North America, on the assumption that the US
                         rejection upon appeal. The same court then   and Mexico would need imports from far-flung
                         rejected its call for rescinding the liquefaction   sources.
                         permit in March 2021 and once again upheld   Shortly after it came on stream, though,   Sempra managers
                         this ruling upon appeal.             hydraulic fracturing (fracking) techniques
                           The case then came to the ICC arbitration   took the US oil industry by storm, opening up   remain confident
                         court for hearing in October 2021, and accord-  unconventional reserves that had hitherto been
                         ing to Global Arbitration Review, this round of   inaccessible. As a result, US domestic gas pro-  that Asia is a
                         debate has also ended in IEnova’s favour. The   duction soared, and the US quickly became a
                         ICC has yet to issue an official statement on the   net gas exporter – and this, in turn, meant that   long-term growth
                         matter, and the companies involved have said   the case for IEnova’s ECA regasification terminal   market for LNG
                         almost nothing publicly.             became much less compelling.
                           Even so, assuming that the report is cor-  Nevertheless, the Sempra subsidiary retooled   made with US gas
                         rect, Shell and Gazprom’s latest defeat in court   its plans and opted to transform the facility into
                         is important. After all, Sempra did describe the   an LNG export terminal capable of receiving
                         lawsuit in an extended report on its performance   US-produced gas from the Permian basin in
                         in the third quarter of 2021 as a threat to the suc-  Texas and liquefying it for delivery to foreign
                         cess of the ECA project, saying: “One or more   markets.
                         unfavourable final decisions on these disputes or   It also drew up a strong new business case for
                         challenges could materially adversely affect our   the project, noting that ECA’s location on Mex-
                         existing natural gas regasification operations   ico’s west coast would allow for relatively faster
                         and proposed natural gas liquefaction projects   sailing to Asia, where demand for gas is strong,
                         at the site of the ECA Regas Facility and have   without the need to pass through the Panama
                         a material adverse effect on Sempra’s business,   Canal, as cargoes from the US Gulf Coast
                         cash flows, financial condition, results of opera-  (USGC) region must do.
                         tions and/or prospects.”               Sempra managers remain confident that Asia
                           Thus far, the lawsuit has not stopped Sempra   is a long-term growth market for LNG made
                         or its Mexican unit from starting work on the   with US gas, despite the recent upswing in Euro-
                         ECA project. In fact, last November, Justin Bird,   pean demand that has followed the outbreak of
                         the CEO of the US company’s Sempra Infra-  war in Ukraine. As such, reports that the ICC
                         structure subsidiary, said that work on the ECA   arbitration court has ruled in IEnova’s favour,
                         Phase 1 project was moving forward.  thereby removing one more obstacle to the ECA
                           “At  ECA LNG Phase  1,  engineering,   project, is good news for the company. ™


























                                                                   Shell and Gazprom had arranged to deliver LNG to ECA in 2009 (Photo: ECA)



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